BANGALORE: International Finance Corporation, the private investment arm of the World Bank, will soon enter the low-cost housing segment in India. The corporation is currently evaluating models such as tying up with developers, entering into public-private partnership with state governments and infusing money into a fund dedicated for affordable housing to give boost to its maiden housing venture in India.

"We had received management approval and wanted to enter into a segment which was largely untapped," said a senior official from IFC, who did not want to be named. IFC, which is working out the modalities, wants to offer homes in the .`3-10 lakh price range to households with incomes between Rs.8,000 and Rs.25,000. IFC will look at such opportunities in the suburbs of Ahmedabad, Bangalore, Delhi-NCR, Pune and Kolkata.

"The team is currently studying the cost implications associated with various models as it is a very high risk area. We need to tread carefully and understand the market," said the official.

IFC is also strengthening its affordable housing team in India. Senior investment and property development managers and green specialist from its global office are expected to join the Indian arm by August. The low-cost housing initiative is currently headed by Subrata Dutta Gupta who was earlier involved in IFC's housing finance business.

In one of its initiative, IFC, India's National Housing Bank, and the Rajasthan government are coming together in a unique public-private partnership to establish a new housing finance company in Rajasthan that will provide home loans to low-income households.

IFC's own stake and mobilisation through stakeholders such as National Housing Bank, government of Rajasthan, and private sector players will help establish the new company with an initial capital of $22 million. "The company would try to replicate a similar model in other states," he said.

The low-cost or budget housing segment in India has also attracted professionals like Jerry Rao, the founder of Mphasis, ex-Citibank executive Ramesh Ramanathan as well as the Tata group. A number of new players have also emerged in the housing finance space for lowcost homes. However, delays in clearances and high land cost for low-cost housing projects are forcing several developers to revisit their projects.

Players like Ahmedabad-based Bakeri Group, Evershine Builders, Lodha Developers and Indiabulls Real Estate have either pulled out of the low-cost housing segment or have changed their offerings. Of the total shortage of about 25 million affordable housing units in India, 98% constitutes demand from economically stressed and low-income households. The government's National Urban Housing and Habitat Policy recognises that public sector resources alone cannot meet this high demand.

Separately, the IFC is in talks with four non-banking finance companies to infuse capital in them to expand its low-income housing finance business in the country. It plans to invest around Rs.20 crore for 20% equity in two-three such NBFCs by 2012. Last year, IFC had picked a minority stake in Adhar Housing Finance, a new company floated by Dewan Housing targeting low-income households for housing finance.